Questions on 1031 into in-laws property

[Andrew Albritton]

My in-laws own a 40 acre almond farm in Central Valley, Ca with a 3200 sq. ft. house on it. To make a long story short, they are no longer able to make payments on the property and are in danger of losing it.

I have a rental property in Southern California that I currently own whose value if I sell should cover the outstanding loan balance on the farm. My idea is to 1031 the SoCal property into the in-laws farm and rent back to them for a minimum of two years, and then decide if we keep renting it to my in-laws, or move my family into it. I realize I must hold onto the property for at least 5 years.

Questions:

1. I assume 1031 exchange is possible as in-laws qualify as an arms length transaction?
2. The property is held in a trust of which both my wife and I are trustees. Does the property need to be removed from the trust and put into my name only? I purchased the property before my wife an I were married and only created the trust after my daughter was born. Up until that point the property was solely in my name.
3. If I decide to occupy the property after 2 years, and decide to sell the property after 5, do I owe the full deferred tax amount, or are the taxes "prorated" based on the ratio of time the property was investment/primary?

Thanks in advance